Part of the appeal of running an e-commerce business is that you avoid many of the standard overhead expenses brick-and-mortar businesses have. While this is true, there’s more to e-commerce than simply paying for inventory and shipping, and it has a few of its own unique business expenses. By planning for the unexpected e-commerce expenses people often miss, you can do a better job of budgeting for your business.
Platform and Processing Fees
The easiest way to set up an e-commerce business is to choose an existing e-commerce platform and payment processor. No matter what platform and processor you choose, those services don’t come free. E-commerce platforms, such as Shopify and Magento, charge monthly fees, and how much you pay depends on the features your site needs. Whether you want to accept credit cards, PayPal, cryptocurrencies, or every payment method under the sun, you need a payment processor to handle the transactions, and they’re going to charge a small fee for each one.
When you check out e-commerce platforms, make sure you consider exactly what you need and how the monthly fee fits into your budget. Take processing fees into account when you price your products so you still make a suitable profit.
Every business has its share of refunds, but return rates with e-commerce businesses are much higher than brick and mortar at 20% There’s always the risk of missing or damaged shipments, and since customers can’t get a feel for your products in person, many buy on a trial basis and figure they can return the product if they don’t like it.
Even if you get the product back, a return still costs you money. One way to reduce refunds is to state in your return policy that you only accept returns when something is wrong with the order. You can still make the occasional exception to avoid chargebacks, which are bad for your business.
E-commerce businesses are prime targets for hackers, and good cybersecurity software is a must to prevent data breaches. You wouldn’t leave the front door to your brick and mortar store unlocked after hours, and leaving your site unguarded is just as bad.
Fortunately, all the top e-commerce platforms and payment processors have strong security measures already, providing you a degree of built-in protection. It’s still smart to invest in extra protection, as a single breach could cost your business thousands and irreparably damage its reputation.
One nice thing about having your business online is that you don’t need to rent or buy an actual store. You still need somewhere to store your inventory, though. While many entrepreneurs keep their inventory at home, this limits how much your business can grow by how much space you have.
As you build your business, you’re going to need more storage, and wherever you store your products must also allow you to fulfill orders quickly and conveniently. You may want to set up a dropshipping arrangement with a supplier or work with a company that stores and ships your products for a fee.
As you’re projecting how much money your ecommerce business can make, keep these expenses in mind to avoid surprises later on.